M/S Practical Financial Services Pvt. ... vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I

Appeal No. ST/41/10

(Arising out of Order-in-Appeal No. SB(42)72/STC/2009 dated 03.11.2009 passed by Commissioner of Central Excise, (Appeals), Mumbai)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

M/s Practical Financial Services Pvt. Ltd.

Appellant Vs.

Commissioner of Central Excise

Respondent

Appearance:

Shri Yash Parmar, C.A for appellant Shri A.B. Kulgod, Asst. Commissioner (AR) for respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of Hearing: 13.08.2015 Date of Decision: 13.08.2015

ORDER NO Per: M.V. Ravindran

This appeal is directed against order-in-appeal No. SB(42)72/STC/2009 dated 03.11.2009.

2. Heard both sides and perused the records.

3. The issue involved in this appeal is (i) whether service tax liability arises on the appellant under the category of Banking and other Financial Services for the commission received by them on new issues & other commission, (ii) whether the appellant is liable to pay the service tax on an amount received for deputation of persons to some other assessees. Undisputedly the appellant is registered with the department as service provider under the category of Stock Broking Services.

4. It is the case of the Revenue that the amount received by the appellant as commission for initial public offer and other activities that they are engaged only for their clients in respect of new issues. Revenue wants to tax this amount under the category of Banking and other Financial Services holding that the appellant would fall under the category of Financial Institutions. We do not agree with the contentions raised by the learned D.R. for the Revenue nor do we accept the findings by the first appellate authority on this issue. Basically, the definition of financial institutions which sought to be relied upon by the lower authorities and the representative is misplaced in as much this Bench in the case of Parag Parikh Financial Advisory Services Ltd.  2015-TIOL-287-CESTAT-MUM has considered identical issue and in para 4.1 held as under:-

4.1 To fall within the tax net, the appellant has to be a banking company or a financial institution including a non-banking company. Obviously, the appellant is not a banking company or a non-banking financial company. As per the definition of financial institution only when the appellant carries on business of acquisition of shares, bonds, debentures or securities issued by a Government or Local Authority or other marketable securities of a like nature, the appellant can be categorized as a financial institution. Merely because the appellant is registered as a stock broker with the SEBI, which is a statutory requirement the appellant cannot be considered as a financial institution. If that be so, all stock brokers dealing in shares/securities would be financial institutions which is a totally wrong interpretation fo the statutory definition of a financial institution. There is also no evidence available on record to show that the appellant has been registered under the RBI Act as a Financial Institution.

It can be seen from the above reproduced paragraphs the issue is now squarely covered in favour of the appellant herein. Accordingly, we hold that the impugned order to that extent it confirms the demand of service tax liability, interest thereof and penalties imposed is unsustainable and liable to be set aside and we do so. Appeal of the appellant to that extent is allowed.

5. As regards the 2nd issue of the fees received for deputation on persons to M/s. Equity Masters India Ltd., we find that the said activity of the appellant would fall under the category of Management Consultancy Services. We have reached this view after perusing the invoices raised by the appellant in the name of M/s. Equity Masters India Ltd., wherein it is very clearly states that the persons deputed for compliance review and strengthening of computer, customers work relating to NSE, front office systems and processes etc. The arguments put forth by the learned C.A. that this activity would not fall under the services of Management Consultancy is incorrect as the services which are raised by the appellant indicate that their employees on deputation were infact doing Management Consultancy Services. To that extent we find that the impugned order is correct and legal and does not suffer from any infirmity. We hold that the appeal of the appellant on this point fails and the service tax liability with interest needs to be upheld and we do so.

6. As regards the penalties imposed, we find that the issue involved in this case is interpretation of the services which were rendered by the appellant, accordingly there can be a bonafide belief in the minds of the appellant. Invoking the provisions of Section 80 of the Finance Act, 1994, we set aside the penalties imposed on the appellant.

7. Appeal is disposed of as indicated herein above.

(Dictated in Court)

(C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial)

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Appeal No. ST/41/10